Best Buy Posts Buoyant Fiscal Q3 Earnings
By Alan Wolf -- TWICE, 12/21/2009
MINNEAPOLIS — Tighter cost controls and strong U.S. performance sent Best Buy's fiscal third-quarter profits soaring 337 percent to $227 million.
Company-wide revenue rose 5 percent to $12 billion and comp-store sales increased 1.7 percent for the three-month period, ended Nov. 28.
In the U.S., revenue increased 9 percent to $8.9 billion thanks to the addition of 87 new locations and a comp-store sales gain of 4.6 percent.
Domestic comp-store sales were driven by increased traffic for the second consecutive quarter and a higher average ticket. Comps improved sequentially each month of the quarter, finishing with an 8.4 percent increase in November that was driven by low double-digit comp increases on Black Friday and Saturday.
Online sales increased more than 20 percent during the quarter on higher Web site traffic and average ticket.
Best Buy's largest comp sales gains were in notebook computers, flat-panel TVs, mobile phones and appliances, which were partially offset by decreases in gaming, movies and music.
White goods showed the most dramatic growth, with comp sales up 10 percent compared to last year's 21 percent decline. The increase may be attributed to the majap industry's first extensive promotional push on Black Friday, and to what chief financial officer Jim Muehlbauer described during a conference call as a higher promotional spend in white goods during the quarter.
Overall, the company attributed its strong U.S. performance to “solid store execution” and bundled product offers that allowed it to “capitalize on changes in the competitive environment.”
Those factors, plus new store openings, the departure of Circuit City, and strength in notebook computers, flat-panel TVs, mobile phones and digital imaging, resulted in an estimated 230-basis-point gain in market share year over year, representing the 16th consecutive quarterly increase.
“I believe the results we announced… show that our commitment to customer centricity is paying off,” said Best Buy CEO Brian Dunn. “I want to thank our employees for helping us achieve significant earnings growth in the quarter and putting us in a position to deliver a good year in a tough environment.”
Going forward, Best Buy said its growth plans and strategies revolve around four key business priorities: growing domestic market share; overseas expansion; containing costs while investing in select growth opportunities; and selling connected devices and subscriptions.
The company said the latter represents a significant opportunity for future growth as only a low-single digit percent of the company's hardware sales, with the exception of mobile phones, are currently sold with a digital connection.
Internationally, the company currently operates five Best Buy stores each in Mexico and China, will open its first store in Turkey during the current quarter, and will open its first big box stores in Europe this spring.
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